Buying property in Florida has become an increasingly popular way to invest. However, like any profitable investment strategy, there are risks and obstacles to overcome.
If you are considering a property investment in Florida, it is important to educate yourself on the real estate landscape. At Royal Empire Realty, we value educating investors so they can make the best decision.
Here are the most prevalent pitfalls of buying investment property in Florida — and how to avoid them.
Properties may be tricky to find right now
If you are new to buying property in Florida, the first challenge you will encounter is how limited the housing inventory in our state is right now.
A slump in house construction during the pandemic has dramatically decreased the supply. In fact, the lower supply has been an ongoing trend for years, in part due to restrictive local laws across the state.
At the same time, a growing number of people want to move to Florida or invest in Florida real estate. Right now, we live in the extremely thin margin between that high demand and a supply that is expected to remain low for some time.
Often, by the time a property has been listed, the negotiation to put it under contract has already happened. Essentially, properties are being sold before they are even available.
How to increase your odds of finding the best property
In today’s market, it is more important than ever to work with the right Realtor. You need someone with deep connections in the local market and the technical know-how to find those off-market properties. You need someone skilled at negotiating quickly and effectively.
At Royal Empire Realty, we are real estate investors ourselves. Our team’s knowledge of the investment market is wider than most Realtors in Florida.
We would love to make your investment dreams a reality, despite the challenging market.
Investors should prepare to pay with cash
The most successful investors in this challenging market are buying property in Florida with cash. In fact, many local buyers have been sidelined, especially if they do not have a lot of savings for a down payment.
Investors must have funds that can be quickly committed to a property before the opportunity is lost. Having a clear idea of how much you can invest quickly will allow you to compete for high-demand properties.
How to compete with investors with deep pockets
To be effective buying property in Florida in this market, you will need investment-savvy Realtors. The Royal Empire Realty team can guide you through financing options as well as the property search itself.
We can also recommend alternative real estate investment options, tailored to the investors’ circumstances. If you want to invest without committing a lot of cash, learn more about syndications in my previous blog post.
It may be costly to insure an investment
Florida is on the frontlines of many climate change challenges. Our beachfront properties are popular investment options, especially if you are interested in a vacation rental. However, Florida cities are constantly fighting to prevent beach erosion and protect property values.
This problem has only gotten worse as the planet has warmed. In fact, climate change could easily intensify our housing crisis. Climate change also has increased the frequency and intensity of hurricanes and extreme weather, which could threaten a new investment.
To complicate the issue, the state’s property insurance market is in crisis, due to rampant litigation against insurance companies. Quality property insurance may come at high premiums, especially for out-of-state buyers.
How to protect your investment
The best way to protect your Florida real estate investment is to be smart about what you buy. Research whether the property is in a floodplain. Many cities and counties provide maps with this information on their websites.
A property within a floodplain will be more expensive to insure. And just because a property is far from the ocean shore does not exempt it from being within a floodplain.
Homeowners associations are popular – and come with extra costs
Some of the best neighborhoods in Florida are kept pristine and desirable with the help of a homeowners association. A homeowners association, or HOA, will often set the standards for property upkeep in the neighborhood. They also manage common areas like the neighborhood pool and the landscaped spaces between houses.
Homeowners associations are fairly prevalent in Florida, and they almost always levy a monthly or quarterly fee against property owners to fund their operations. That means the monthly bill to maintain an investment property could be higher than investors anticipated.
How to handle homeowner associations
Decide if and how much you are willing to pay on homeowner associations fees for a potentially higher quality neighborhood. You can look up the rules and regulations of different associations in the official records of the county where you would like to invest. The records are public record and may be available online.
If you need help searching or need advice on which homeowners associations are worth the cost, please contact us.
Property taxes will vary by county
Speaking of counties, investors should research the local tax rates for any property they are considering. Property taxes can vary widely, depending on where the property is located. Both the county and city can leverage their own tax rate, and those tax rates may change from year to year.
Florida does have what is called a homestead exemption. This allows homeowners to pay less property taxes when it is their primary residence. Often, this means investors pay a larger share of the local tax burden when they invest in Florida.
What to do about property taxes
A good Realtor will help you research your monthly costs before they suggest buying a particular property in Florida. In fact, how much you can afford to pay per month may affect your overall investment strategy.
At Royal Empire Realty, we have experience with local taxes because we are experienced investors ourselves. We stand with our investors every step of the way to ensure not only the purchase itself goes well but that they are happy with their investment choice even after the sale is finalized.
Royal Empire Realty is here to assist you in all your real estate investment needs. Our knowledgeable team will help you navigate around all pitfalls of buying property in Florida. Contact us about investing in Florida to expand your Empire!